Extract from Hansard [ASSEMBLY — Tuesday, 10 October 2017] p4316b-4346a Mr Peter Tinley; Dr Mike Nahan; Mr Donald Punch; Mr Dean Nalder; Mrs Lisa O'Malley; Mr Terry Redman; Ms Emily Hamilton; Mr Kyran O'Donnell; Acting Speaker; Mr Terry Healy; Mr Zak Kirkup; Ms Libby Mettam; Mr Ian Blayney; Mr Shane Love; Mr Barry Urban; Amber-Jade Sanderson APPROPRIATION (RECURRENT 2017–18) BILL 2017 Third Reading MR P.C. TINLEY (Willagee — Minister for Housing) [6.00 pm]: On behalf of the Treasurer, I move — That the bill be now read a third time. Sitting suspended from 6.00 to 7.00 pm DR M.D. NAHAN (Riverton — Leader of the Opposition) [7.00 pm]: If it is relevant, I am not the lead speaker on the Appropriation (Recurrent 2017–18) Bill 2017. I understand that we have only 15 minutes to speak on the third reading of this bill. I will go through it. This is a very important budget. It was the first budget of the new McGowan government and it sets a pattern of where it is going. In our time in government, we went through a very difficult time in our state. We had a lot of demand for services. We expanded them significantly. We had a lot of demand for capital. We also had some real shocks to the economy. The investment boom grew and declined; the production boom did not come on as much; we had, of course, the rise in a new, unique source of revenue to Western Australia in iron ore royalties; and there was the related decline in GST. They put real pressures on the management of the state of Western Australia. The new government won an overwhelming mandate for a variety of things, including coping with the fiscal stresses that are facing the state. One of the biggest challenges our government faced, which was highlighted in the debates over the last three or four years but particularly in the Pre-election Financial Projections Statement put out by Treasury, was the need for a debt reduction strategy. It was widely debated. The Liberal Party put a proposal to the people of Western Australia and it was not accepted. The Labor Party won the election in a landslide. However, it did not have a real debt reduction strategy, and it shows. [Quorum formed.] Dr M.D. NAHAN: The aggregates show — A government member: You didn’t get anybody in here! Dr M.D. NAHAN: It is the government’s job. A government member: Nobody’s interested in what you’ve got to say. Dr M.D. NAHAN: The member for Willagee is. He is sitting in the Premier’s seat and listening. Mr R.H. Cook: What about your people? What about the troops? Dr M.D. NAHAN: Members opposite disrupt me! Mr R.H. Cook: Press on. Dr M.D. NAHAN: Here we go. The ACTING SPEAKER (Ms S.E. Winton): Thank you, members! Dr M.D. NAHAN: The aggregates for the budget show that. The Pre-election Financial Projections Statement had debt going from $37.4 billion in 2017–18 to $41.1 billion in 2019–20 as far as it went. This budget shows that the debt goes up in 2017–18 by $500 million and in 2019–20 it goes up to $43.8 billion—a $2.7 billion increase. Treasury told us in the PFPS that debt was too high. It was particularly a risk because, to a large extent, it is a large number. Interest rates are at a record low right now. Treasury argued strongly—it warned both parties—that we needed to do something about debt. This budget does not do that; debt goes up to $43.8 billion and there is no apparent plan for the government to pay it down like a mortgage or otherwise or, indeed, to cap it. That is a real weakness of this budget. In the budget a whole range of revenue was brought forward from 2016–17 to 2017–18 to adjust the deficits around those two years to make it look a little better, but in reality 2017–18 will have the highest deficit ever in Western Australia’s history—$2.6 billion once properly adjusted. The deficit in 2016–17, which at one time when we brought down the budget was supposed to be $3.9 billion, came in at $2.2 billion. In other words, debt is going up to the highest level and the deficit is expected to be the highest in history. That does not illustrate a coherent plan to reduce debt and deficit, which is needed. One of the major reasons for that is that revenue has deteriorated across the board, particularly own-source revenue, but not as high as the government has indicated. I am sure that my colleague, the member for Bateman and shadow Treasurer, will deal with some of those. The reality is that the government went into the campaign with and has booked in this budget $3.7 billion of additional expenditure, all by increasing debt, and none of it was really affordable. That is the challenge the budget has. [1] Extract from Hansard [ASSEMBLY — Tuesday, 10 October 2017] p4316b-4346a Mr Peter Tinley; Dr Mike Nahan; Mr Donald Punch; Mr Dean Nalder; Mrs Lisa O'Malley; Mr Terry Redman; Ms Emily Hamilton; Mr Kyran O'Donnell; Acting Speaker; Mr Terry Healy; Mr Zak Kirkup; Ms Libby Mettam; Mr Ian Blayney; Mr Shane Love; Mr Barry Urban; Amber-Jade Sanderson My major concern, going through both estimates and the budget, is that I do not think the forward estimates beyond 2017–18 are credible at all. Just to indicate how significant this is, the budget forecasts after 2017–18 show no growth or a decline in expenditure for every major essential service. Health spending after 2017–18 decreases in nominal terms by 10 per cent. During our watch, the lowest we got revenue to grow in any one year was 4.8 per cent. The last three years of this budget forecast that health expenditure will decrease by over three per cent a year. That is a seven per cent turnaround. That is simply and utterly impossible. We can look at spending in education, mental health, child protection, corrective services and police—all those areas have recurrent expenditure after 2017–18 that is declining in real terms. How can the government do that? The government does have a lot of plans underway. It is not the wages policy that is doing that—the wages policy is a $1 000 increase per year per employee, so it is going up a bit but not significantly. There are some redundancies built into that, which will pay off over time. There are a few other efficiencies in a few places, but it is completely impossible to believe, given the policies the government has put in place, that it can lead to or sustain real reductions in expenditure in every essential service across government for three years. It is impossible to believe that, not this year but the following year, hospital spending as forecast in the budget will go down by over three per cent, or that school and corrective services expenditure will go down. It is just not believable. What is going on? I assume that the government is banking on a large windfall in GST or something else because it will either have to make some total revision to the budget or find some other source of revenue, or in about a year’s time the budget will haemorrhage. No matter how good the government’s financial management is, it is not possible in this state to restrain expenditure across all services below population growth and inflation. So what will happen? The result will be more debt. It will be impossible to meet these expenditure commitments, and not many other revenue sources are available to the government, so there will be a large increase in deficits and a growth in debt. The $3.7 billion includes a range of capital expenditure for Metronet but, as I indicated in the matter of public interest today, it does not include any expenditure for the election commitments for the Ellenbrook rail line, the Byford rail extension, the Karrinyup train station, medihotels, the Joondalup Health Campus expansion, the Geraldton Hospital expansion, the Bunbury Hospital expansion, the Collie Hospital expansion, and the solar farm and biomass plant in Collie. I do not know what those would add up to, but it would be many billions of dollars. I assume the government will meet those commitments, and some will go past the forward estimates, which is, to some extent, fair enough, but my point is that the government needed to go into the budget with a debt reduction strategy, and it chose not to. This budget shows debt and deficit growing to historic levels, and they will not level off, even on the basis that the last three years of the forward estimates are complete fiction. They are not even close to being possible to meet, and therefore something has to give. Expenditure will grow. Even if the Treasurer is as successful in tightening expenditure as he is committed to—good luck to him—he simply cannot hold every essential service, from mental health to child protection, to corrective services, police, education and health, down to negative growth for three years in a row, especially when it is assumed that population growth, which is very slow now, will go back to 1.8 per cent a year.